Stocks in Asia opened mixed and gold futures rose to a record high as investors weighed simmering Sino-American tensions against signs the virus spread in the U.S. may be slowing. The dollar extended its recent slide.
USD continued the slide even when geopolitical risks escalated. Billionaire investor Ray Dalio said conflict between the U.S. and China could expand into a capital war that would harm the dollar. Negative real rates in the U.S. and the uncontrolled spread of coronavirus in the U.S. have been the drivers that pushed the greenback further down.
Copper prices are on track to continue its rally, as a weaker U.S. dollar makes the metal attractive for buyers using other currencies. However, we do caution the limited upside in prices as investors remain wary of the geopolitical tensions which could keep market risk sentiment under wraps. Elsewhere, according to Reuters, the supply disruption that we are expecting in Chile have not materialised as Antofagasta’s avoided a strike at Zaldivar copper mine in Chile, while mediation talks at its Centinela mine were extended in a last-ditch effort to stave off a strike.
Gold prices extended gains, rallying close to its historical high as escalating tensions between US and China coupled with a weaker dollar buoyed demand for the precious metal. Looking ahead, the fundamentals for gold remains bullish as it is often seen as a safe-haven asset and hedge against inflation and currency debasement.
Oil prices dipped further from last friday as the markets factored in the worsening relationship between US and China. This is despite some early reports that the number of cases for wave 2 of the pandemic has started to flatten out. Further, investors are still bracing themselves for the relaxation of the output curbs from OPEC+ starting in August. The CAD weakened as well, however, against a much weaker USD, the CAD seemingly outperformed.
Technical & Trade views
USDCAD (Intraday bias: bearish below 1.3377)
We turned bearish as price is testing our downside confirmation where 61.8% fib extension is. Price is likely to drop further from the level towards 1st support if price breaks below. MACD also indicates bearishness.
UKOIL (Intraday bias: Neutral between 43.41 and 42.84)
Oil drifted sideways. With technical indicators giving mixed signals, and price holding between 1st resistance at 43.41 and 1st support at 42.84 and no good levels for entry, we prefer to remain neutral for now.
XAUUSD (Intraday bias: Bullish above 1909.50)
Price is facing bullish pressure from our ascending trend line and first support, in line with our 78.6% retracement, 161.8% fibonacci extension and horizontal overlap support, where we could see a bounce above this level. The Ichimoku cloud is showing signs of bullish pressure as well.
XCUUSD (Intraday bias: Bullish above 2.86093)
Price is facing bullish pressure from our ascending trend line and first support, where we could see a bounce above this level. Ichimoku cloud is showing signs of bullish pressure as well.